Five Simple Ways to Eliminate Credit Card Debt
How to Permanently Pay off Debt and Live Revolving Debt Free
Oct 2, 2009
Credit card debt is a fact of life for most people. From high-end jewelers to fast food restaurants, it seems that plastic is accepted nearly everywhere; and the convenience of using the cards makes them appealing tools for a wide range of purchases. While the convenience and ease of use make credit cards a useful tool, many people are finding themselves trapped in a cycle of overspending and compounding interest, which culminate in mounting credit card debt.
Where to Start Paying Off Debt
To get out of credit card debt, one must first address the problem of compound interest. For each month a consumer carries a balance on the credit card, the bank charges daily interest, which can range anywhere from five or six percent to as much as 30 percent. In general, consumers with better credit scores and payment histories will find the lower interest rates available to them.
As purchases are made, the interest begins accruing immediately – unless the balance was paid in full the previous month. This interest adds up each day, making every item purchased with a credit card more expensive than the same item purchased with cash. The interest, or finance charge, is then added to the credit card balance each month, where – if not paid off – it begins accruing interest of its own. Sometimes the minimum payment on the credit card bill is actually less than the finance charges for the month, so consumers making only the minimum payments are likely to continue spiraling further and further into debt.
Getting out of credit card debt requires paying off the debt with the highest interest rate first, and paying off more than is added to the balance each month in purchases and interest. It also requires adjusting the habits and attitudes that feed the credit card cycle. These five simple habits will help consumers reduce credit card debt immediately, and eventually, to eliminate credit card debt forever.
Simple Steps to Reduce Credit Card Debt
- Facing reality. How much do credit cards really cost? One way to find out is to go back through the credit card statements for the last year and add up the finance charges incurred, and think about where that amount of money would have been better spent. It may also be helpful to highlight unnecessary purchases made because pulling out the credit card was so easy.
- Avoiding credit card use. It sounds simple, but this can be the most difficult step. Many people overspend each month because credit cards create the feeling of having more money than is really there. If getting through the month without using credit is difficult, then it is time to make some budget cutbacks.
- Paying on time. Being late on a credit card payment can not only incur a late fee, which then collects interest, but it can also increase the interest rate charged.
- Negotiating lower rates. Many credit card companies are willing to provide temporary lower interest rates for those struggling to pay off debt. Consistent payments also earn lower rates – a consumer can call the credit card company every few months to see if he or she qualifies for a lower rate. Contrary to popular perception, one need not employ a professional to negotiate better rates; any consumer has the power to do this alone.
- Making more than the minimum. The key to reducing credit card debt is to pay more each month than is added to the card. Instead of making the minimum payment set by the credit card company, wise consumers should pay the minimum payment plus the amount of the finance charge accrued that month.
Becoming Debt Free
By practicing these five simple steps, one can significantly reduce credit card debt, or eliminate credit card debt entirely. There is no need to pay a “credit counseling” service to accomplish these same steps; doing them independently can save consumers thousands of dollars. The discipline learned by faithfully following these five steps can also help consumers establish better financial habits, and avoid the problems of credit card debt in the future.
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